Insurers are concerned with balancing growth and expense management. Few carriers are willing to declare victory in the war against expenses. Companies appear to be working on expenses as a priority, but we think it has become business as usual. It is always on the agenda and is always being addressed but is never a true driver in strategic decision-making.
Some carriers have institutionalized expense management and are out engaged in some kind of tactical expense program year in-year out. These programs tend to be managed in the context of the 3-year planning process and annual budget. They focus on squeezing discretionary spending or executing blanket budget cuts across all departments, or focus on expense levers such as adjusting spans of control and eliminating management layers.
Over time, expense programs that are routine or tactical tend not to permanently adjust spend-levels or change competitive positioning. Expense levels have a way of coming back. Something more structural is often needed.
Insurers have told us that expense cuts typically do not stick and that expenses chronically come back. Our work with the industry points to the need to look at structural and operating model changes in concert with more tactical changes to make sure that cuts occur in the right places, and that dollars saved are invested into building future capabilities.